Rakesh Wadhwa

Kathmandu:

The biggest reason which people give in favour of government intervention is, ‘protection of the poor’. The question inevitably put to me is, ‘don’t we need to rein in businessmen and help the needy with laws and regulations?’

The reason advocated for government involvement is always ‘public interest’. Consider the government regulation of trade, particularly where imports are involved. Government intervenes on our behalf ostensibly to protect the poor workers. If imports are freely permitted, won’t it destroy employment in industries which are unable to face worldwide competition?

The government of Nepal has created a special WTO cell which is helping it to introduce an anti-dumping and counter-veiling Act. The purpose is to protect domestic firms from the ravages of dumping of foreign goods and to check the entry of highly subsidized international products.

The aim of the WTO cell is – you guessed it – public interest. What is going to happen is anything but in the interest of the public. Let us look at the impact on citizens of this country of levy of customs duties and other restriction on imports by way of licensing etc.

Goods for consumers in Nepal became more expensive. An unskilled factory worker may afford to buy a Rs 50 toy from China for his child but if the import is banned or taxed at a 100 per cent rate of duty his child may have to do without it.

Subsidized cement from Indonesia and low cost steel from India may result in a middle class salaried employee being able to construct a three-bedroom house instead of his family having to manage within the confines of a single bedroom.

Lower costs of fruits and vegetables make them affordable for those below the poverty line and may save many from the effects of malnutrition. When parents can’t afford to adequately feed their families, it is children who suffer the most. Lower costs are beneficial for most of us as we are principally consumers. However, it does not mean that all of us gain. Some lose.

The losers are businessmen and producers of goods which can’t compete with the lower priced imports. It is they who lobby the government to restrict imports and will complain loudly about dumping at the WTO cell.

Consumers who are many in number but who will be impacted very little with each individual restriction will not find it worth their while to go to the WTO cell and plead for freer imports. Is the mother, who will have to pay Rs 100 instead of Rs 50 for a doll from China for her daughter, going to go to the government, or, is it more likely that the local manufacturer of dolls lobbies the WTO cell for levying yet more duties on allegedly subsidized toys from China?

Each individual restriction on imports may cost us little but taken together we in Nepal are immeasurably harmed by being a high tariff nation. This by itself would be bad enough, but the adverse affects of import restrictions do not end here.

High costs resulting from high duties and restrictions lead to loss of employment which directly harms the poor.

Yes, a few jobs in protected industries may be saved, but the job losses due to higher costs lead to curtailment of employment in export industries.

High input costs – higher cement, steel, and computer costs – mean that exports cannot be competitively priced. It is this competitive pricing of exports due to zero or near zero rates of duties in Singapore, Hong Kong, Switzerland, and Ireland which have made these countries into export powerhouses. Imports and exports do go hand in hand.

Nepal has an advantage over other nations – it is endowed with the magnificent Himalayas. Why not enhance its appeal to the tourists by making it a zero duty, import free zone.

The increase in employment in the tourist industry and the reduction in poverty will overshadow even its mighty mountains.

People, internationally, will then know Nepal for its economic clout and not only for its Mount Everest.

(The writer can be contacted at: everest@mos.com.np)